Add to Canada’s “Net Benefit” Test for Foreign Deals: Public Opinion

It was already difficult to figure out what Ottawa has in mind when it weighs up Cnooc Ltd.’s $15.1-billion bid for Nexen Inc. for economic “net benefit.” Now, the government is saying it will also weigh public opinion, adding another variable to the mix.

Investors have recently been recalculating their bets on the Cnooc-Nexen deal going through, after the Canadian government blocked Malaysia’s Petroliam Nasional Bhd., another state-owned firm, from its proposed bid to acquire Canadian natural-gas producer Progress Energy Resources Corp. Ottawa has left open the door for Petronas to re-submit its bid for review, and the Malaysian giant has said it will continue to pursue the deal.

Under Canadian law, any foreign investment over 330 million Canadian dollars ($332.4 million) is scrutinized by government officials to ensure the transaction provides “net benefit” to the economy. Generally, government officials eye pledges made by the investor on job creation and capital investment, and commitments to behave as a good corporate citizen. Nowhere in the Investment Canada Act is there anything about public opinion.

Based on recent polls, Cnooc might have reason to worry about the new metric.

Angus Reid Public Opinion found in a recent poll that 58% of respondents to an online survey, conducted Oct. 10 and 11, opposed Cnooc’s planned purchase, and 47% said state-owned enterprises shouldn’t be allowed to control resources on Canadian soil. Last month, Ottawa-based Abacus Data said a poll it undertook indicated over two-thirds of Canadians wanted the federal government to block the transaction.

“Canadian public opinion is a hurdle for the government,” David Coletto, Abacus chief executive, wrote last month when deciphering his polling results.

Cnooc’s chief financial officer, Zhong Hua, said in a conference call earlier Wednesday that the company was working to complete the deal before the end of 2012. A spokesman for Cnooc declined to comment.

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